What Happened:

Shares of online travel agency Expedia (NASDAQ:EXPE) fell 14.2% in the morning session after the company reported first quarter results. its growth regrettably slowed and its gross bookings fell short of management's expectations, indicating weaker demand going forward. A reason for the lower bookings was Vrbo, whose recent re-platforming is progressing slower than anticipated. On the other hand, Expedia topped analysts' revenue and EPS expectations. 

Zooming out, we think this was still a decent but mixed quarter due to the lower bookings and demand trends. 

Following the weak performance, Wall Street analysts downgraded the stock's rating. BMO lowered the stock's rating from Outperform to Market Perform (Neutral) and trimmed the price target from $165 to $145. Similarly, Piper Sandler downgraded the SPT's rating from Overweight to Neutral and lowered the price target from $175 to $145. The analyst added "bookings growth is deteriorating while margin uplift from tech improvements and a recent RIF remain elusive."

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What is the market telling us:

Expedia's shares are quite volatile and over the last year have had 6 moves greater than 5%. But moves this big are very rare even for Expedia and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 20.3% on the news that the company reported fourth-quarter results showing revenue growth stalled as its gross bookings came in lower than expected due to a reduction in average air ticket prices and pressures from the Middle East crisis. 

On the other hand, Expedia beat analysts' adjusted EBITDA expectations this quarter. Expedia's demand outlook wasn't so encouraging. While it expects travel demand to remain relatively healthy, growth rates across the world are expected to decelerate. 

Looking ahead, the company expects gross bookings in Q1 to be in the low single digits, with revenue growth in the mid-single digits. The Management added that it continued to see" continued pressure in air business due to reduced pricing levels from increased capacity and the grounding of the Boeing fleet, as well as some pressure in our Vrbo brand."To lead the company moving ahead, the company announced the appointment of Ariane Gorin as CEO, effective May 13, 2024, succeeding Peter Kern, who will transition to the role of Vice Chairman and continue as a member of the Board of Directors, ensuring a smooth transition. Ariane Gorin has been at Expedia since 2013, where she has served as President of Expedia for Business. 

Overall, this was a mediocre quarter for Expedia, and the market was likely looking for more bookings.

Expedia is down 20.9% since the beginning of the year, and at $117.79 per share it is trading 26.1% below its 52-week high of $159.47 from February 2024. Investors who bought $1,000 worth of Expedia's shares 5 years ago would now be looking at an investment worth $925.71.

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